"I call these `stinker' savings bonds because if they're not earning interest, they are a terrible investment," said Tom Adams, who runs Savings-bond-advisor.com.

"Even though people say they can't afford to pay the taxes, the reality is they just need to put some of the money aside to pay those taxes when they cash them in."

Investors assume that by delaying the decision they'll never have to pay tax because the savings bonds will outlive them. But their heirs will be stuck with the tax bill because deferred tax on savings bonds never dies.

"Our record-keeping office that seeks the owners of these securities tells them that in the long run it would be better to be earning interest on their money," said Stephen Meyerhardt, spokesman for the U.S. Treasury's Bureau of Public Debt.

"But whether the amount is substantial or not, they've been told for 30-plus years that paying any tax at all is a very bad thing and they just don't intend to do it."

Mistake No. 2: Investors forget about their savings bonds for many years and then suddenly wake up to wonder what they may be worth.

Mistake No. 3: Investors cash in every savings bond they own all at once in the same tax year. This generally occurs just before retirement when they're in the highest tax bracket of their working lives.

As a result, they're socked with huge additional income from all that built-up interest when they should instead be patient and take their time.

"This is the deferred-tax `time bomb' because people who buy their savings bonds over an extended period of time should also cash them in the same way," Adams said.

Mistake No. 4: Many investors don't understand that inflation-adjusted savings bonds, known as I-bonds, can fluctuate significantly and aren't fully aware that Series EE bonds also are considerably different these days.

Although the I-bond's fixed base rate never changes over its life, it earns additional interest based on the current inflation rate that is calculated every six months. That can make a big difference, especially in periods of inflation peaks and valleys, such as those that took place over the past year.

Investment in I-bonds hit a 10-year high early this year, when the rate was 6.73 percent, but then fell to a 20-year low when its rate declined significantly in May to the current 2.41 percent.

Adams expects the I-bond rate to increase to more than 5 percent Nov. 1 and revitalize that market.

Finally, in May 2005, the Treasury started selling the Series EE savings bond at a fixed rate instead of the variable rate previously offered. This rate - currently at 3.7 percent - is now good for 20 years, with the Treasury able to set a new rate for the last 10 years of the bond's 30-year life.